On 29 September 2020, the Lower Administrative Court (Tribunal administratif) handed down several decisions in cases involving requests for information that the Luxembourg tax authorities (hereafter the “LTA”) had addressed to several Luxembourg lawyers and law firms whose names had appeared in the international press in the context of the so-called "Panama Papers" leaks. In this context, the president (Bâtonnier) of the Luxembourg Bar Association had previously reminded lawyers involved of the fundamental importance of their professional secrecy in the relationship between them and their clients and that no follow up on the requests of the LTA should be provided, at the risk of civil, criminal and disciplinary sanctions. Due to the lack of reply, the LTA issued pecuniary sanctions against them. The lawyers’ appeal, after having been refused at the pre-litigation level before the Director of the LTA, reached the Lower Administrative Court.
In its judgments, the Court first analysed the legal basis on which the LTA issued these requests for information. The judges found that the legal basis invoked only allows information to be requested from a third party that is not the taxpayer concerned by the request in two cases: 1) for the purpose of carrying out a tax audit or 2) in the context of a tax investigation procedure, for the purpose of establishing tax claims. Regarding the first situation covered by the law, the judges note that the requests for information are very broad and do not target a specific taxpayer(s), but seek information on an undetermined number of unknown taxpayers who may be residents or non-residents, a request that was qualified by the judges as a "fishing expedition". Since the request for information is not aimed at a specific taxpayer(s), the judges conclude that the request has not been issued for carrying out a tax audit so that the first situation does not apply. Regarding the second situation covered by the law, the judges note that the LTA issued the requests after the names of the lawyers appeared in the context of revelations made by a whistle-blower to journalists of a German daily newspaper. According to the judges, the origin of the initiative to issue the applications cannot be qualified as a tax investigation procedure for establishing tax claims, so that the second situation does not apply either. Finally, the Court concludes that the LTA exceeded its powers in addressing these requests for information to the lawyers and consequently annulled the decision of the LTA’s Director not to agree with the lawyers’ refusal to cooperate.
This decision of the Lower Administrative Court is welcomed as it demonstrates the limits of the powers of the Luxembourg tax authorities, who cannot act as they please, but have to act in accordance and within the boundaries provided by the law. In addition, these decisions demonstrate the importance of the professional secrecy between lawyers and their clients. The government decided to appeal the case in front of the Higher Administrative Court (Cour administrative), the outcome of which is eagerly awaited.